The 2016 Stock Market Outlook

Where are stocks headed in 2016? Will one of the longest bull markets on record finally come to an end in 2016 or is there enough gas left in the tank to push the market to higher highs? According to the strategists at Wall Street’s biggest banks, you should expect moderate stock market gains in 2016. The average estimate according to Wall Street strategists is for the S&P 500 to close the year at 2200—an 8% increase from yesterday’s close and a 10% gain from the time the estimates were made.

If an 8% to 10% gain sounds like a familiar forecast from this crowd, that’s because it is. The consensus forecast from strategists rarely falls outside of the historical market return. But that doesn’t make a 10% gain a good forecast. If you are of the mind to make annual stock market forecasts (were you dropped as a child?), it is best to assume stocks will be up a lot or down a lot.

Since year-end 1949, there have been 18 down years for the S&P 500 (not counting dividends) and 47 up years. The median return in up years is almost 16% and the median return in down years is -11%. Only once since 1950, has the S&P 500 closed up with a 10 handle.

So what is the stock market going to do in 2016? As J.P. Morgan once said, it will fluctuate. You can also count on it surprising Wall Street’s soothsayers.

Jeremy Jones, CFA

Jeremy Jones, CFA is the Director of Research at Young Research & Publishing Inc., and the Chief Investment Officer at Richard C. Young & Co., Ltd. Jeremy is a contributing editor of youngresearch.com.